Congress extended the tax credits outlined below through March 31, 2021.
Employers will be allowed to claim a credit against their payroll taxes (specifically section 3111(a) of the Internal Revenue Code, the Old-Age and Survivors Insurance Trust Fund, commonly known as Social Security) an amount equal to 100% of the qualified sick leave wages paid by the employer, subject to the limits below.
Employers with group health plans may also be eligible for a credit claimed against the employer-paid health care costs while an employee is on leave.
Self-employed individuals also may qualify for tax credits. Under the bill, an eligible self-employed individual means an individual who regularly carries on a trade or business within the meaning of section 1402 of the Internal Revenue Code and would be eligible to receive either paid sick leave or FMLA leave if the individual were an employee of an employer (other than himself or herself).
Credit for Paid Sick Leave
- Credit based on employees: For purposes of determining the credit for sick leave, the amount of qualifying sick leave wages may not exceed $511 per day for a maximum of 10 days. However, if the paid sick leave is used to care for a family member or for a child whose school has closed or where childcare is unavailable, the amount of qualified sick leave wages eligible for the credit is capped at $200 per day.
If the credit exceeds the amount owed under section 3111(a) for any calendar quarter, the excess is refundable.
- For self-employed individuals: The bill provides a credit equal to 100% of the qualified sick leave amount for eligible self-employed individuals who must self-isolate, obtain a diagnosis or comply with a recommendation to self-isolate due to coronavirus. Under these circumstances, the credit amount is capped at the lesser of $511 per day or the average daily self-employment income for a maximum of 10 days. The credit is reduced to 67% when caring for a family-member or for a child whose school or childcare is closed. Under these circumstances, the credit is capped at the lesser of $200 per day or the average daily self-employment income.
The credit is claimed against income taxes and is refundable.
Credit for Family and Medical Leave
- Credit based on employees: The amount of qualified family leave wage taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the amount owed under section 3111(a) for any calendar quarter, the excess is refundable.
- For self-employed individuals: The qualified family leave equivalent amount is capped at the lesser of $200 per day or the average daily self-employment income. The maximum number of days is 50.
Lastly, the bill creates a special rule such as any wages required to be paid for emergency family and medical leave or sick leave shall not be subject to payroll taxes under section 3111(a). That saves employers the 6.2% social security tax on eligible wages. The bill also grants an employer an additional tax credit against Medicare taxes paid.
NAHB is providing this information for general information only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.